New York Markets After Hours

Your Financial Health: Two New Scores

AnnaMariaAndriotis

For consumers who have been obsessively tracking, repairing and perfecting their credit scores, two new metrics would like your attention. The Debt Score. The Identity Risk Score. And there'll be more to come, experts say, though whether they'll be as useful as credit scores remains to be seen.

From Myers-Briggs to a Cosmo dating quiz, there's something irresistible about a self-diagnosis – which is precisely what these new scores promise to deliver. Last month, Credit.com launched its "identity risk score," which tells consumers how likely they are to become victims of identity theft. The month before, debt-management site Oweing.com rolled out a debt score, which grades consumers' debt relative to their income and other factors. And this is just the beginning, as firms urge consumers to start monitoring additional layers of their financial lives as closely as their credit score. It's going to be "a score frenzy," says John Ulzheimer, president of consumer education for SmartCredit.com, a credit-monitoring site.

But critics say these scores are far from credit score territory. Unlike credit scores, which banks use to determine who qualifies for loans, these metrics are aimed strictly at consumers, says Odysseas Papadimitriou, chief executive at CardHub.com. And they're often with the aim of selling other products and services. Users who check their Debt Score are encouraged to upgrade to DebtGoal, which costs about $15 a month for extras like a customized debt payoff plan and updates as they incur or pay down debt. Consumers who check their identity risk score will receive information about the web site's fraud monitoring services, which start at $4.95 a month. "It's part of a brand building process," says Jack Macy, a director at Credit.com, which plans to move to its own subscription model in the next few months though the identity risk score will remain free.

What can the free scores tell you? "It's a starting point for the consumer to go in and, in 20 seconds, get a good picture of their financial health," says JB Orecchia, CEO of Oweing.com, which owns Debt Score. In order to compute the score, consumers need to supply information about their income, housing expenses, student loans, and everyday debts, like credit card and car loan balances – the same information, critics point out, a consumer would need to do a simple debt-to-income ratio on their own. (Carrying total debt that's more than 36% of gross income is a warning sign, says Sheryl Garrett, a fee-only certified financial planner.) The score also weighs a consumer's age and education to determine overall debt health, though consumers could also factor in those two elements on their own.

The Identity Risk Score, on the other hand, scans information that consumers can't easily access on their own. Its network is maintained by an identity theft protection company that accesses banking and retail databases, among others, to track suspicious activity. It looks at several factors that would indicate a risk for identity theft, including whether a consumer's information has been compromised in a data breach, or whether a social security number is attached to accounts that belong to others. But it's incomplete: It doesn't factor in off-line risk factors, like mail theft, and it may overemphasize the risk associated with data breaches, which can affect millions of people at a time, often to little or no consequence. In fact, incidences of identity theft dropped 27% in 2010, according to Javelin Strategy & Research. New credit card accounts were the most common fraudulently opened account as a result of identity theft.

Adam Levin, co-founder of Credit.com, says the identity risk score can minimize the risk of exposure. "And it can help detect as early as possible [if] you are a victim." Now it's up to consumers to determine whether that -- and the Debt Score -- are helpful enough that they'll pay for more.

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